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Homework answers / question archive / Variances: Say Something Company provided the following information regarding Factory Overhead (OH) from its flexible OH budget
Variances: Say Something Company provided the following information regarding Factory Overhead (OH) from its flexible OH budget. The company has an operating capacity of 50,000 units and expects to operate at 80% of its productive capacity (i.e. at 40,000 units, which is 80%*50,000): 60% 30,000 18,750 DLh Operating Levels (% of capacity) 70% 80% 35,000 40,000 21,875 DLh 25,000 DLh 90% 45,000 28,125 DLL ???? Maaaaa Flexible OH Budget: Budgeted output (units) Budgeted DL hours Budgeted OH: Variable OH Fixed OH Total OH $206,250 $50,000 $256,250 $240,625 $50,000 $290,625 $275,000 $50,000 $325,000 $309,375 $50,000 $359,375 During the current month, the company operated at 70% capacity and used 22,000 actual DL hours, producing 35,000 units. The following actual overhead costs were incurred: Actual Variable OH: Actual Fixed OH: Actual Total OH: $250,000 $55,000 $305,000 a. Calculate the predetermined standard OH rate for i. Variable OH ii. Fixed OH iii. Total OH b. Calculate the Variable OH Cost Variance Calculate the Fixed OH Volume Variance d. Calculate the Fixed OH Cost Variance C.
(a) standard rate for
(i) variable overhead rate = variable overhead / standard output.
= 275,000/40,000 = $6.875
(ii) fixed overhead rate = fixed overhead / standard output
= 50,000/ 40,000 = $1.25
(iii) total overhead rate = total overhead / standard output = 325,000/ 40,000 = $8.125
(b) Variable overhead cost variance = ( actual output * standard variable overhead rate per unit ) - actual variable overhead.
Actual output = 35000+10% = 38,500 units
Standard variable overhead rate per unit = $ 6.875.
Actual variable overhead = $250,000
(38,500*6.875) - 250,000
= 264687.5 - 250,000
= 14687.5 (F).
(c) Fixed overhead volume variance = (Budgeted output - Actual output ) * standard fixed overhead rate per unit.
Budgeted output = 40,000 units
Actual output = 38,500 units.
Standard overhead rate per unit = $1.25
(40,000 - 38,500) * 1.25
= 1500 * 1.25
= 1875 (F).
(d) Fixed overhead cost variance = ( Actual output * standard fixed overhead rate per unit ) - actual fixed overhead.
Actual output = 38,500
Standard fixed overhead rate per unit = $1.25
Actual fixed overhead = 50,000
38,500*1.25 - 50,000
= 48,125 - 50,000
= 1875 (U).
